We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell 3D Resources Limited (ASX:DDD), you may well want to know whether insiders have been buying or selling.

Do Insider Transactions Matter?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

See our latest analysis for 3D Resources

3D Resources Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by insider Peter Proksa for AU$132k worth of shares, at about AU$0.005 per share. So it's clear an insider wanted to buy, at around the current price, which is AU$0.005. Of course they may have changed their mind. But this suggests they are optimistic. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. Happily, the 3D Resources insider decided to buy shares at close to current prices. Peter Proksa was the only individual insider to buy shares in the last twelve months.

You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insider Ownership of 3D Resources

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. 3D Resources insiders own about AU$5.5m worth of shares. That equates to 28% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At 3D Resources Tell Us?

The fact that there have been no 3D Resources insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Insiders own shares in 3D Resources and we see no evidence to suggest they are worried about the future. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Case in point: We've spotted 5 warning signs for 3D Resources you should be aware of, and 3 of them can't be ignored.

But note: 3D Resources may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.